We are in spurious territory right now. Think of how different 1900-2000 has been, compared with 1500-1900. There is no reason – besides nostalgia – to believe that the reality of the next five, ten, twenty years will be based entirely upon our experiences over the last 100.

It looks to me like learning enough to buy single family rental homes (3 bedroom/2 bath) would be a whole lot better in the long run than jumping deeper into this market. (One good location for less hype is http://www.johnschaub.com.)

The market doesn’t look like a good place for the next few years, though I have no idea when the final results of all the FED printed money will ultimately hit.

Brad

Any comments welcome! Thanks!

Typically, retirees should move more of their portfolio to risk-free investments as a rule of thumb. The reason can be summed up in 1 word: time.

Retirees are living the last years of their life, so any potential risk of loss should be reduced because they simply cannot recover the amount lost. To put it crudely, they are going to die in the “sooner-than-average” future, so they should be taking steps to make sure that what they have saved up should be distributed evenly over the years, not lost in playing with electronic numbers on a lightboard.

Much as I agree with the “buy when it’s low” axiom, I would like to caution against buying too much in this period. I think doing an indepth analysis of markets is a case of TMI (too much info), but the short story is that markets are taking a beating and will probably get more depressed before the expected upturn occurs.

Translation: Prices are expected to drop further, but stocks and shares you own should increase in value before the year is out. Don’t sell what you own, buy stuff that you think are a bargain and always, always, always know what you are getting yourself into before throwing your hard-earned money away. Warren Buffett analyzes each purchase before he makes it, you should too.

Bogle (founder of Vanguard) actually went so far as to say that retirees should move a portion of their money into risk-free bonds.

Alternatively, if you really do wish to get back into the same stock, you could also wait 31 days before buying it back.

You wanted to know where people get money to buy in down markets, and that is essentially the answer. They rebalance. Doesn’t mean you can or should or ought to–you said yourself that you have a plan and you’re dollar-cost averaging. If you remain essentially balanced in your asset allocation, it’s a mistake to change it in response to market conditions.

Let’s face it folks, real estate bounces back, even if it takes a while. Fortunately, I still have about 20 years to wait.

Not even Warren Buffett thinks so, nowadays. He pointed out in his last meeting with shareholders that if we grew at that rate the Dow would be somewhere around 2 million. By investing in an index fund, that is what you are betting on.

The fact is, the tremendous growth we have experienced over the last 30 years was built on the back of cheap credit, cheap energy (oil and coal), and cheap overseas labor. All of those things are coming to a halt.

We are standing on the brink of change, and what we are seeing now with the markets tanking is just the tip of the iceberg. I sure wish you could point out some of those “doom and gloom” stories in the media, because all I see are people towing the party line: “Buy while it’s cheap!”

Here’s a hint: things are going to get worse.

Subprime resets are set to peak in July 08, so 6 months after that we may see a peak in foreclosures. All option ARM resets peak in 2011, so MAYBE housing prices will the hit bottom then. For the first time in the history of the US, banks have gone into the red on reserves, and are being forced to borrow money from the FED and overseas at loan shark rates in order to stay solvent. The dollar is tanking and the FED just keeps slashing rates to keep the ship floating.

So, you go on and buy your index funds with your hold and pray mentality. If you think it’s a sure thing, just remember if you invested in 1929, it took until 1954 to earn your money back (not counting inflation). I hope you don’t plan on retiring anytime soon.

So to make a blanket statement to “just keep” buying is a little bit deceiving and incorrect.

You should be BUYING things that are on discount and SELLING things that are peaking.

To use the grocery store example, you stock up on items that are CHEAP and skip the things that are expensive.

Buying into an index fund is simply going to the grocery store and buying one of everything because everything averages out: low items average out with high items.

Trent is right: when stuff is on sale you buy.

You have choices, too: you can buy stocks, real-estate, money – they are all cheap right now.

In all cases, if you have a 20 – 30 year outlook, history virtually guarantees you a great outcome … it’s up to you to decide if this is the right market to take the same chance with (only) a 5 – 10 year outlook.